Warning that the weak U.S. economy will continue to drag down consumer spending this year, Wells Fargo & Co. issued a blanket downgrade of the transaction processing segment.

"There is no doubt that consumer spending will be the pivotal issue in 2010 for our group, and probably the economy as a whole," Well Fargo senior analyst Timothy Willi wrote in a research note last week. "When we look at the job market, housing market and savings rates, we are not confident that there is a backdrop for sustainable improvement in spending and transaction volume growth."

Willi's note covered 16 companies that offer payments services including Visa Inc., MasterCard Inc., and VeriFone Holdings Inc.

He downgraded the sector to "market weight," from "overweight," though he singled out a few companies for praise.

Western Union Co. and Euronet Worldwide Inc. could both benefit from an anticipated increase in remittance volume, Willi said, and he expects Total System Services Inc. to see its efforts to expand abroad start to add to the bottom line. He also noted that any labor market improvements could play to Automatic Data Processing Inc.'s core business of outsourced payroll processing.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.